Strong Media and Ad Results Lurk Within Lukewarm Q4 for IAC

  |  August 1, 2007   |  Comments

Media and ad revenues increased by 33 percent on the year.

IAC/InterActiveCorp (IAC) released second-quarter results showing a 78 percent increase in quarterly net profit and a 6 percent gain in revenue over last year, but revealed softness in a number of its business areas, including Ticketmaster.

Due largely to increases in marketing expenses, IAC's operating income fell 33 percent to $54 million, said the New York-based company. However, some of the more disappointing facets of the company's Q2 earnings report were partially offset by good news in its media and advertising sector, where revenues increased by 33 percent on the year.

IAC reported healthy growth from syndicated search queries and from increased queries and revenue per query at Fun Web Products. It conceded that these gains were "partially offset by lower revenue per query across most other properties."

During the conference call, IAC executives said they remain doggedly optimistic about the future of IAC's Ask.com search engine despite the Q2 report's notation that the upgraded Ask experienced a "lower revenue per query since the launch" in June. The company suggested the new "Ask3D" makes searches easier and more fruitful, requiring fewer clicks but yielding "higher frequency and retention."

IAC reported network revenue growth in its search and media area "outpaced that of proprietary revenue, primarily due to an increase in syndicated sponsored listings." During the conference call, executives said they expect a new marketing campaign for Ask, expected to launch later this year, will further boost visit frequency and retention. They conceded a recent campaign for the search engine wasn't as effective as they'd hoped. But IAC Chairman and CEO Barry Diller said the campaign served a purpose.

"It was not necessarily effective on day counts for new users, but it was effective for repositioning Ask and introducing the new Ask," he said. "There's no question that we do have a compelling product. But we have got to be more direct in telling people about it."

In total, IAC reported $1.5 billion in revenue, a growth rate of 6 percent, and $136 million in operating income before amortization, compared to $165 million for the second quarter of 2006. "While Q2 consolidated results were not what we hoped, they were directionally what we expected," said IAC Chief Financial Officer Thomas McInerney.

IAC said revenue in the quarter showed "increased year-over-year contributions from every sector. It said retailing revenue increased slightly, reflecting "a modest gain" at Home Shopping Network, strong growth at ServiceMagic and modest growth at Ticketmaster. Declines at LendingTree were attributed to a slump in the home loan market.

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